587 B.R. 809
Bankr. S.D.N.Y.2018Background
- Plaintiff Makenna Bennett was a passenger in a 2004 Dodge Durango (manufactured and sold by Old Chrysler) that rolled over in July 2015, leaving her paralyzed; she sued FCA US LLC (New Chrysler) for, inter alia, negligence and failure to warn seeking compensatory damages.
- Old Chrysler sold substantially all assets to New Chrysler in 2009 under an MTA and Sale Order that transferred assets "free and clear" except for Assumed Liabilities; original MTA excluded product liabilities arising from pre-closing sales.
- Amendment No. 4 (Nov. 19, 2009) to the MTA expanded Assumed Liabilities to include certain Product Liability Claims arising from pre-closing manufactured vehicles when the accident occurred post-closing, subject to limitations (statute of limitations, no asbestos claims, no punitive damages).
- Plaintiff’s complaint includes a Product Liability/strict liability claim (First COA) and a negligence/failure-to-warn claim (Second COA); Utah federal court transferred the Second COA to the Bankruptcy Court for interpretation of the Sale Order/MTA; remaining claims were returned to Utah.
- New Chrysler moved to dismiss the Second COA under Rule 12(b)(6), arguing Amendment No. 4 did not assume liabilities based on Old Chrysler’s "conduct" (negligence), while Plaintiff argues the negligence/failure-to-warn claim is a Product Liability Claim assumed by Amendment No. 4.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Plaintiff’s negligence/failure-to-warn claim is an Assumed "Product Liability Claim" under Amendment No. 4 | Bennett: negligence/failure-to-warn is a Product Liability Claim arising from a pre-closing manufactured vehicle and post-closing accident, thus falls within Assumed Liabilities | New Chrysler: Amendment No. 4 did not assume liabilities for Old Chrysler’s pre-closing "conduct" (negligence/acts or omissions); only product (strict liability) claims were assumed | Court: Claim is a Product Liability Claim and falls within Assumed Liabilities in Amendment No. 4; dismissal denied |
| Whether the MTA’s exclusion for "liabilities in strict liability, negligence ... for acts or omissions" precludes Amendment No. 4's expansion | Bennett: Exclusion is subject to express Assumed Liabilities; Amendment No. 4 expressly assumed product liability claims meeting enumerated criteria | New Chrysler: Section 2.09(j) exclusion shows parties intended to exclude negligence-based conduct claims regardless of Amendment No. 4 | Court: Reading exclusions to override express Assumed Liabilities would be absurd; Assumed Liabilities in Amendment No. 4 control for covered Product Liability Claims |
| Whether "product liability" includes negligence theories | Bennett: "Product Liability Claim" definition is broad and covers negligence, strict liability, breach of warranty theories | New Chrysler: attempted to limit assumed scope to strict product-liability only | Court: "Product liability" commonly encompasses negligence, strict liability and warranty theories; NY law treats negligent design and strict liability as functionally synonymous |
| Whether the Second COA should be dismissed or remanded | Bennett: claim survives because it is an assumed product liability claim | New Chrysler: claim barred, should be dismissed | Court: Denied motion to dismiss; Second COA transferred back to Utah District Court for adjudication on non-bankruptcy law issues |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard for plausibility)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard and Twombly/Iqbal framework)
- Law Debenture Trust Co. v. Maverick Tube Corp., 595 F.3d 458 (2d Cir. 2010) (contract-ambiguity inquiry)
- Int'l Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76 (2d Cir. 2002) (contract interpretation principles)
- Revson v. Cinque & Cinque, P.C., 221 F.3d 59 (2d Cir. 2000) (when ambiguity and extrinsic evidence govern)
- Voss v. Black & Decker Mfg. Co., 59 N.Y.2d 102 (1983) (product liability theories available under NY law)
- Denny v. Ford Motor Co., 87 N.Y.2d 248 (1995) (discussion of functional equivalence of negligent design and strict liability theories)